As we have now officially landed in the summer season (of course, the real summer travel season really started Memorial Day weekend), the question that seems to come up every year remains “Why do gas prices go up during the summer?” Andrew Holland, Senior Fellow for Energy and Climate with the American Security Project, a non-profit, non-partisan public policy and research organization that looks at a range of national security issues, including energy, in Washington, D.C., says it’s because so much of our fuel is still made from crude oil, a commodity that is subject to the fluctuations of the market and many other factors.
“The easy answer is: it’s complicated,” Andrew says. While a large portion of the gas price is due to crude oil price affected by the predictions (as opposed to actual supply and demand), this time of year, the change in price has a lot to do with switchovers at the refineries from winter types of fuels to summer types that can cause some short-term shortages. Plus, the increase in demands due to more summer driving for vacations and the seasonal uptick in economic activity drive prices higher. But he believes alternative fuels, while not solving all these issues, could help a bit with those summer gas price spikes.
“It’s using less oil, as a society and as individuals,” Andrew says. “People are buying new cars that are much more fuel-efficient than previous cars, and that’s driving down consumer demand. If everybody demands less oil, that means the oil is going to be a bit cheaper.”
He points to alternative fuels, such as ethanol, and alternatives to travel, such as carpooling or public transit as being more ways to reduce that consumer demand. Andrew also talks about the “social costs of carbon” and external factors, which adds anywhere from 10 cents to $3-4 per gallon of transportation fuel. But he also says that higher taxes on gas and crude oil could help spur the growth of technologies that would ultimately end up lowering the amount of fuel used and actually save people money in the long run.
“It incentivizes us to have alternatives. It makes sure there’s an incentive for producers to produce more fuel-efficient cars,” Andrew says. And he says it doesn’t just have to mean more money out of people’s pockets. It can reduce taxes elsewhere. “If we increase the price of gasoline a dollar a gallon, but reduce everybody’s payroll taxes by a similar amount, then it’s a tax shift… and most of us who drive less would pay much less.”
Listen to more of Joanna’s interview with Andrew here: Andrew Holland, Senior Fellow, American Security Project